How May Funds Be Used?

Loan funds may be used to construct, enlarge, or improve community facilities for health care, public safety, and public services. This can include costs to acquire land needed for a facility, pay necessary fees, and purchase equipment required for its operation. Examples of essential community facilities include: 
 

Health Care: Clinics, ambulatory care centers, hospitals, rehabilitation centers, and nursing homes. 

Telecommunications: Medical and educational telecommunication links. 

Public Safety: Communications centers, police and fire stations, fire trucks, rescue vehicles, and jails. 

Public Services: Adult and child care centers, city halls, courthouses, airports, garages, off-street parking facilities, sidewalks, street improvements, college classrooms and dormitories, libraries, museums, schools, fairgrounds, and animal shelters. 

Who May Apply?

Loans and guarantees are available to public entities such as municipalities, counties, and special-purpose districts, as well as to nonprofit corporations and tribal governments. 

In addition, applicants must have the legal authority to borrow and repay loans, to pledge security for loans, and to construct, operate, and maintain the facilities. They must also be financially sound and able to organize and manage the facility effectively. 

Repayment of the loan must be based on tax assessments, revenues, fees, or other sources of money sufficient for operation and maintenance, reserves, and debit retirement. 

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What Are The Terms?

The maximum term for all loans is 40 years. However, the repayment period is limited to the useful life of the facility or any statuary limitation on the applicant's borrowing authority. 

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What Is The Interest Rate? 

Interest rates for direct loans are based on current market yields for municipal obligations, although loans for facilities impacting prime or unique farmland may require a slightly higher rate. Certain other direct loans may qualify for a lower interest rate, depending upon the median household income of the residents of the community to be served. The interest rates for guaranteed loans may be fixed or variable and are determined by the lender and borrower, subject to Rural Utilities Programs review and approval. 

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What Security Is Required?

Bonds or notes pledging taxes, assessments, or revenues will be accepted as security if they meet statutory requirements. Where State laws permit, a mortgage may be taken on real and personal property. Tax-exempt notes or bonds may be issued to secure direct loans, but cannot be used for guaranteed loans. 

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Copyright © August 1996, USDA Rural Development Revised on: March 23, 2005